Distributors

Whether Apple can deliver the iPhone 6 with super-tough synthetic sapphire displays is still very much up in the air, according to a press release from a research firm that tracks the materials industry. Unspecified "bottlenecks at various levels" of the sapphire production process mean that Apple may limit this year's introduction of sapphire iPhone displays or possibly even scrap the plan.

Apple is achieving its goal of reducing the cost of the displays, down to about $16 for a finished 4.7-inch cover, according to estimates by Eric Virey, senior analyst with Lyon, France-based Yole Développement, a market research firm, which issued a press release summary excerpting some data from Virey's most recent report, "Sapphire Applications & Market: from LED and to Consumer Electronic report," August 2014 edition. (The full report is available for a charge at the Yole website.)

Apple, and its sapphire furnace partner GT Advanced Technologies, have been adding capacity and ramping up sapphire production at a new factory in Mesa, Ariz. But they face challenges because of the sheer scale of creating sapphire covers for millions of smartphones, possibly in the two sizes that Virey says Apple will introduce later this year: with 4.7- and 5.5-inch screens. Sapphire is second in hardness only to diamond, so sapphire smartphone screens would be more resistant to scratching and breaking than even the treated glass, such as Corning Gorilla Glass, used today. [See our in-depth report "How Apple's billion dollar sapphire bet will pay off" and a companion slideshow on sapphire production, "Here's how Apple is spending $1 billion on sapphire"]

The two companies announced their partnership in November. Yole concluded that the scale of the planned operation meant Apple was moving far beyond using small pieces of sapphire, sourced from existing producers, to protect iPhone and iPad camera lenses, and the fingerprint scanner integrated with the iPhone 5s home button. The investment's goal, according to Yole, "is to produce sapphire display covers for cell phones."

"We believe that prices for the sapphire cover have been agreed upon and locked by contract, based on yield assumptions reflecting reasonable expectations from all partners," Virey says in the press release. "We used yield assumptions derived from other Tier-1 sapphire makers in the LED industry [where sapphire is widely used as a substrate] to model the cost for both sizes. For the finished 4.7" display, we estimate a cost of $16, including $6.7 at the slab (material) level. On the longer term, we see a path for [less than] $13."

Based on those same assumptions, Virey estimates that Apple's supply chain -- which has to make big investments in equipment to cut, shape, smooth, and polish a material much harder than the more conventional treated glass covers "could deliver more than 5 million display covers per month."

Yet that is only a fraction of the number of new smartphones Apple realistically will sell in the final months of this year, if it releases the iPhone 6 in late September or October. In Oct-Nov. 2013, Apple sold just over 51 million iPhones (the newly announced iPhone 5s and 5c, and the older iPhone 4s). The last time Apple sold as few as 5.2 million iPhones was the Apr-June 2009 quarter. [Statista has the full history of quarterly iPhone unit sales]

What's more, Virey says he estimates the current supply chain capacity is only about 2.1 million units per month. "If yields don't improve rapidly, Apple walking away from sapphire is still a possible scenario," he says. He adds that he "believes that moderate quantities of supplemental material is currently being sourced from GTAT equipment customers in China."

But even with that added material, he says Apple won't have enough sapphire for all of the 2014 iPhones. That leaves several possibilities: one, as mentioned, is Apple walking away from the sapphire plan entirely, though that seems unlikely unless there are persistent yield problems due to scale or quality; second, aiming for 2015 to introduce sapphire; three, introducing sapphire on one model; more specifically, Virey says, on one SKU, or stock keeping unit, which could, for example, be one configuration of a 4.7- or 5.5-inch model.

"Releasing at least one SKU with sapphire would allow Apple to gauge customer response and decide if it should adopt sapphire on more models, plan for more investment in the supply chain or simply walk away," Virey says.

Slideshows

Google and Microsoft tackle triple value play at Synnex Alliance 2018

This Synnex Alliance roadshow, in association with Google and Microsoft, started with the end-user and worked back to define the notion of value, outlining the lucrative partner opportunities ahead in 2018.

Changing names: the top company rebrands hitting the channel

The past year has seen a flurry of acquisitions, sales, consolidations and business transformations in the local tech sector; ARN takes a look at the company name changes and rebrands across the Australian channel that have resulted from all this activity.

Upcoming tech talent share insights at Emerging Leaders 2018

The channel came together for the third running of the ARN Emerging Leaders Forum in Australia, created to provide a program that identifies, educates and showcases the upcoming talent of the ICT industry.

Copyright 2018 IDG Communications. ABN 14 001 592 650. All rights reserved. Reproduction in whole or in part in any form or medium without express written permission of IDG Communications is prohibited.